An option premium is a positive function of:
A) Time to expiry
B) The volatility of the price of the underlying comm
C) The moneyness of the option
D) All of the above

Question

Quizplus · Accepted Answer

Option premium is influenced by all three factors - time to expiry, volatility of the underlying commodity, and moneyness of the option. Time to expiry determines the likelihood of the option being exercised, while volatility affects the expected price movement. Moneyness refers to the relationship between the strike price and spot price of the underlying commodity. Therefore, all three factors influence the option premium.

An Option Premium Is a Positive Function Of